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Luxury Wedge

A right-sized carbon tax could help greatly in driving down greenhouse gas emissions. Like any general consumption tax, however, a carbon tax is regressive, hitting the poor harder than the rich. However, there is a case to be made that in a greenhouse world, everyone should do their part, including the wealthy, by limiting unnecessary consumption. Hence the need for luxury wedges, designed to curb luxury consumption so as to compel the wealthy to do their part to mitigate global climate change (GCC).

Consider again airplane travel, where we saw that holding the number of flights steady over the next fifty years might provide three wedges. If we assume that the wealthiest 10% of the world’s population (roughly those with an annual income of $10,000 or more)[i] account for 90% of flights and that much of this travel is discretionary, then we might construct our plane wedges in a way that transformed them, to some degree, into luxury wedges.

For example, we might tax a person’s first flight at a percentage n ­of the cost of a ticket, her second at n x 2, her third at n x 3, and not allow more than p personal flights annually (with allowances for medical or bereavement exceptions) —and ban the personal ownership and use of planes (again allowing for reasonable exceptions in the public interest). In a similar manner, Pacala and Socolow’s “reduced vehicle use” and “efficient buildings” wedges might be partially transformed into luxury wedges, through some combination of progressive taxation and outright prohibitions. Automobiles priced above n that did not meet fuel efficiency standards could be taxed at a percentage q of the cost of the vehicle, at 2 x q of the cost for even less efficient vehicles, etc.—while the least efficient vehicles could be banned (with exceptions for work-related vehicles and transportation for the handicapped). Houses with floor plans larger than n square meters could be taxed at a percentage r for the first extra thousand square meters, 2 x r for the next thousand, and 3 x r for the third extra thousand—while even larger houses could be prohibited (again, with reasonable exceptions).

When I discuss the alternative wedge scheme in lectures or public debates, my suggestions to prohibit outright certain kinds of high-emissions consumption are always unpopular. They shouldn't be. Avoiding catastrophic climate change is a moral imperative. We should be willing to forego luxuries in order to do so.

It is possible to construct luxury wedges without prohibitions, solely through progressive taxation; and an “efficiency” case can be made that the extra tax revenues generated by luxury consumption justify allowing it to continue, particularly if those revenues are used to mitigate GCC or benefit the poor. On the other hand, setting strict limits to individual carbon pollution would acknowledge the seriousness of the problem and represent a society-wide commitment to avoiding catastrophic GCC. Theoretically efficient approaches which undermine such moral commitment—by encouraging the wealthy to burnish their status through luxury consumption, for example, while the common folk ape or envy them—might wind up being ineffective and hence not truly efficient.

It has become a commonplace in ethical discussions of GCC to say that we should not try to solve this problem on the backs of the poor; as Henry Shue puts it in his article “Subsistence Emissions and Luxury Emissions” (attached): “the central point about equity is that it is not equitable to ask some people to surrender necessities so that other people can retain luxuries.”[ii] But it is probably also true that we won’t be able to solve the problem solely on the backs of the world’s striving middle classes, who are unlikely to forego desired consumption or pay much more for goods and services, without strong evidence that the wealthy are also doing their fair share—and not just buying their way out of doing so.

Arguably from a fairness perspective, from a wide buy-in perspective, and from a maximal emissions reductions perspective, it makes sense to consider the absolute prohibition of some high-energy, luxury consumption.Overall, we probably will need a mix of “goodies” (incentives and increased options) and “baddies” (general carbon taxes, luxury consumption taxes and outright prohibitions) to find the most efficient and fair means to cut consumption and rein in GCC.

Surprisingly, amazingly, I have not found any discussion in the scientific or philosophical literatures of what role cutting back on high-end consumption might play in a comprehensive effort to mitigate GCC; hence my discussion here of luxury wedges is underdeveloped. However, it seems to me such alternatives should be considered as a matter of basic fairness, and I would welcome suggestions for how to specify particular luxury wedges more rigorously.

Happily, we do have some possibilities for decreasing emissions by increasing people’s consumption options; for example, building high speed trains in Japan and western Europe has apparently helped slow growth in domestic and regional plane travel, lowering overall carbon emissions. We need to push such win/win strategies hard (see the discussion on population stabilization), while remaining realistic about how much they can achieve. Improved technologies and more options, by themselves, cannot achieve lower overall carbon emissions. Humanity will have to cut back on luxury consumption.

[i] In 1993, the annual per capita income of people in the ninetieth percentile of income distribution worldwide was $9110, according to Branko Milanovic, “True World Income Distribution, 1988 and 1993: First Calculations, Based on Household Surveys Alone,” The World Bank, Development Research Group, policy research working paper 2244 (November, 1999), page 30, table 19.